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LEGO BUILDING ITS WAY TO CHINA

BOMBAY-Danish toymaker LEGO System is setting its sights on India as a building block to other markets in southeast Asia, particularly China.

With import duties on toys recently cut from 100% to 50% in India, LEGO is using the country as a jumping-off point to China, beginning with a test started earlier this year in Bombay.

"China and India represent the two most populous countries in the world, so there is some similarity in the distribution pattern," said Otto Didericksen, marketing director of southeast Asian operations of LEGO Overseas, Singapore. "However, India has a very big middle class which represents our main potential. This is not the case in China yet."

LEGO already is present in several Asian countries including Japan, Singapore, Hong Kong, Malaysia, Indonesia, South Korea and the Philippines, but has yet to tap the burgeoning Chinese market.

LEGO, based in Billund, Denmark, is starting distribution in India through DCW, a $112 million marketer of salt, flour and chemicals. DCW's 100,000 outlets moved LEGO to choose it as exclusive Indian distributor.

A separate LEGO division has been established within DCW here. Initially, 75 of the toymakers' 378 games are selling in Bombay in a test running through next month.

Priced from $6.38 to $223, the LEGO building block sets are undoubtedly India's costliest toys to date. But LEGO notes the prices are half that of smuggled LEGO sets brought in from Dubai, United Arab Emirates, the most popular illegal supply line.

Still, the company-with approximately $1 billion in worldwide sales-needs to establish an Indian identity for the brand. The marketing strategy is to convince mothers of the educational value of the premium-price blocks.

The focus is apparent in the supporting $150,000 print and outdoor campaign from Kaishma Advertising, a Lintas subsidiary. The ads, running in newspapers such as the Times of India, extol the role building blocks play in intellectual development with the headline: "New breed of architects and engineers to begin construction of airports and hospitals in Bombay."

Market Wars

"The basic ad strategy is to sell LEGO toys as an educational medium-learn while you have fun," said Kaishma President Raj Gupta.

LEGO is also using promotion to reach 1- to 16-year-olds, with building block competitions and teacher-backed product demonstrations in schools.

In India, LEGO faces no rival with products of similar quality. Local toymaker Leo; Taiwan's ATCO; and Funskool, a local joint venture of Hasbro and Madras-based tiremaker MRF, make blocks but they lack the polish of the imported LEGO sets.

Nearly 65% to 70% of the $57.4 million toy market here is dominated by unbranded products.

"LEGO's only competition will be the mind-acceptance of the concept," Mr. Gupta said. "Most parents would love to give their children educational toys. It's the children who pull them the other way."